It’s time to fix Oregon’s regressive tax structure

In this era of extreme income inequality, Oregon’s taxes should help to push back against this destructive trend. Sadly, Oregon’s regressive tax system is making matters worse.

Oregon’s poorest families pay more in taxes as a share of income than any group of taxpayers in the state, while the richest Oregonians pay the smallest share of any group. That is the conclusion of a new report by the Washington, D.C.-based Institute on Taxation and Economic Policy (ITEP).

The ITEP report found that Oregon's overall tax structure is regressive, with the lowest-income taxpayers paying 10.1 percent of their income in combined state and local taxes — a higher share than the 8.1 percent paid by Oregon’s richest 1 percent. Oregon families in the middle 20 percent of taxpayers also pay a larger share of their income in taxes than the richest, at 9.1 percent.

The ITEP study, Who Pays?, takes into account all major state and local taxes, including personal income taxes, corporate income taxes, sales taxes, property taxes, estate taxes, and excise taxes such as gasoline and cigarette taxes.

When considered in a national context, Oregon’s tax structure still looks better than that of most other states. According to the study, Oregon has the 10th least regressive tax system among all states and the District of Columbia. Oregon’s northern neighbor, Washington, has the nation’s most regressive tax structure.

But the fact that most states have a more unjust tax structure does not absolve Oregon. Our state’s lowest-income residents are struggling to afford rent and put food on the table. Asking these Oregonians to pay a larger share of their income in taxes than the highest-income Oregonians is a disgrace.

It’s long overdue for Oregon to right this wrong, to put matters right-side up. That requires action by the Oregon legislature on both ends of the income ladder.

Especially after the massive tax cuts that the rich received at the federal level from the Trump tax plan, raising Oregon’s tax rates on the most well-off needs to be on the table. This would not only help correct our unfair tax structure but also raise revenue to invest in our schools and essential services that benefit all Oregonians.

Another critical step is to ramp up Oregon’s Earned Income Tax Credit (EITC), a refundable tax credit that helps low-income working families. The Oregon EITC largely mirrors the federal tax credit that goes by the same name. Both in Oregon and nationally, the tax credit has enjoyed a long record of bipartisan support. A big boost to the Oregon EITC would help to correct Oregon’s flawed tax structure by lowering the taxes of those who earn the least. More importantly, it would help struggling families make ends meet.

Taxes play a fundamental role in determining how much real opportunity exists in Oregon. Like in the rest of the nation, we have work to do.

The Oregon Center for Public Policy researches and analyzes tax, budget, and economic issues. Our goal is to improve decision making and generate more opportunities for all Oregonians. Learn more about the Center.